The Morning Risk Report: SNC-Lavalin Wants U.S.-Style Bribery Outcome

As anti-corruption enforcement becomes increasingly global, companies may wish that other countries would stick to the finely-tuned U.S. model of hashing out bribery settlements. SNC-Lavalin Group sure does.

Canadian police filed criminal bribery and fraud charges against the Montreal-based engineering firm last week, which the company plans to contest. The move shows that the country's bribery enforcement efforts are picking up and that Canadians are not necessarily following the American model of settling such cases. Such a move by police would be nearly unheard of in the U.S., where corruption charges are usually only filed against a big corporations as a part of a negotiated settlement. This point was not lost on SNC-Lavalin, which responded to the Canadian charges with a press release pointing out that "companies in other jurisdictions, such as the United States and United Kingdom, benefit from a different approach" that lets companies resolve bribery investigations "while balancing accountability and securing the employment, economic and other benefits of businesses." The company also mentioned internal changes that may well have curried favor with U.S. authorities in settlement talks, including a compliance overhaul, new chief executive and a clear ethical "tone from the top." There's little sign these changes helped their case with Canadian authorities.

Last week's developments in the SNC-Lavalin case show that increasingly global bribery enforcement poses new risks to companies. Authorities in these countries may not follow the well-worn playbook used in U.S. bribery cases that many companies and their lawyers know well. What's more, some countries have started to pursue their own investigations after a firm has neatly tied things up with U.S. authorities, a term lawyers have dubbed "carbon copy prosecutions."

Eli Lilly bribery probe ended after 11 years. More than eleven years ago, authorities told Eli Lilly & Co. that it was under investigation for foreign bribery. Last month, that probe quietly came to a close. The Justice Department told the pharmaceutical company in January that it has closed its foreign-bribery probe of the firm without pursuing charges, the company said in a February securities filing. The disclosure is an example of how bribery probes can drag on for years as some of the activity in question becomes decades old.

Where the World Bank focuses compliance enforcement. World Bank penalties have figured prominently in big corruption cases, including those against Alstom and SNC-Lavalin Inc. Corruption is “very corrosive to the goals that we’re trying to achieve,” said Pascale Hélène Dubois, the World Bank’s chief suspension and debarment officer. But the organization doesn’t just focus on corruption cases–it also pursues many fraud cases, Ms. Dubois said, in an interview.

COMPLIANCE

U.S., Europe weigh further Russian sanctions. The U.S. and its European allies are discussing additional sanctions on Russia over its actions in Ukraine, Secretary of State John Kerry said Saturday ahead of a meeting with U.K. Foreign Secretary Philip Hammond, the WSJ reports. What is happening in Mariupol was "simply unacceptable," Mr. Kerry said. The U.S. has expressed concern about new attacks near the port, which is the largest city outside of separatist control in the conflict area in Ukraine.

HSBC chief alleged to hold Swiss account. HSBC Holdings PLC’s Chief Executive Stuart Gulliver was dragged Sunday into a tax-avoidance scandal swirling around the bank after a newspaper alleged that he had held funds in a Swiss account via a Panamanian company. Mr. Gulliver held around £5 million in a Swiss account and is domiciled in Hong Kong for tax and legal reasons, The Guardian newspaper alleged in a report on Sunday night. An HSBC spokeswoman declined to comment or make Mr. Gulliver available to comment.

Citi executive leaving. Just weeks before a crucial examination by regulators, Citigroup Inc. announced on Friday the departure of an executive linked to its troubled Mexico unit and cut the pay of its chief, the WSJ reports. The banking giant said Manuel Medina-Mora, who runs Citigroup's consumer bank, will leave in June, though he will stay on as nonexecutive chairman of Banamex, the firm's large retail operation in Mexico. In an unusual move, Citigroup didn't say who will succeed him, but said it will make that announcement in "the near future."

Sysco raises antitrust concerns for investors. Investors are casting a wary eye toward pending mergers with possible antitrust issues after the Federal Trade Commission voted to block Sysco Corp.’s acquisition of rival US Foods Inc., the WSJ reports. While the FTC’s challenge wasn’t a surprise to many investors, it showed a willingness by the FTC to be more aggressive in fighting possible threats to competition in pending deals. “It does signal a shift,” said Jonathan Kanter, an antitrust partner at law firm Cadwalader, Wickersham & Taft LLP.

South Africa fines Deutsche over controls. South Africa has fined German's Deutsche Bank 10 million rand ($857,743) for not having appropriate anti-money laundering measures, the central bank said on Friday, Reuters reports. The central bank also said in a statement that it fined a local bank Capitec Bank 5 million rand for failing to comply with security laws.

Broker alleges retaliation for exposing fraud. A former Morgan Stanley broker has filed a suit accusing the firm of firing him for being a whistleblower who had raised allegations of insider trading involving its Knoxville, Tenn., branch and had helped federal authorities uncover fraud at a truck-stop chain, the WSJ reports. The broker, John Verble, says in his filing that he wore a wire to help the Federal Bureau of Investigation investigate the fraud case, and that a superior at the Morgan Stanley office physically threatened him when his efforts became known. A Morgan Stanley spokeswoman denied Mr. Verble’s allegations and said “there is no basis” for the lawsuit, which the firm plans to “vigorously contest.”

CFTC probes "spoofing" trades. The Commodity Futures Trading Commission and several exchanges are looking at whether a trader broke securities laws or committed fraud through "spoofing," or engaging in thousands of quick trades intended to trick other traders, the WSJ reports.

EU renews sanctions on Zimbabwe. The European Union renewed for another year its sanctions against Zimbabwe, including a travel ban and asset freeze on President Robert Mugabe and his wife, according to a notice on Friday in the EU's Official Journal, Reuters reports.

India regulator suspends firm over alleged money laundering. The Securities and Exchange Board of India (Sebi) on Friday suspended trading in a finance company, widening the crackdown against shell companies used to allegedly launder money through the stock exchange route, the Busines Standard reports.

Aviation industry, regulators at odds. U.S. air-safety regulators and aviation industry officials continue to clash over reducing fuel-tank explosion risks on some widely used cargo jets, seven years after such federal fixes were mandated for some 3,000 Boeing and Airbus passenger planes, the WSJ reports.

DATA SECURITY

Sony hack shows business, government weaknesses. The cyberattack on Sony Corp. last year laid bare not just weaknesses in corporate Internet security but major shortcomings in how the government and companies work together to respond to attacks, the WSJ reports. A review of the Sony hack, based on interviews with executives, U.S. officials and people briefed on their conversations, shows that the companies and agencies fighting the hackers hewed so closely to their own interests that some decisions were made based on little information or consultation.

OPERATIONS

West Coast ports resume operations. West Coast ports are finally working at full speed again, but it will likely take months for the backlog to clear, port officials and logistics experts said, the WSJ reports. Full operations resumed at West Coast ports Saturday evening, after the International Longshore and Warehouse Union and the Pacific Maritime Association, which represents employers, came to a tentative agreement on a new five-year labor contract late Friday. The contract still must be ratified by members.

More U.S. refinery workers on strike. Union workers walked out of three more U.S. refineries this weekend, including the nation’s largest fuel-making facility, expanding a nearly monthlong strike, the WSJ reports. After the latest negotiations ended late Friday, workers at the Motiva Port Arthur Refinery in Texas, the nation’s largest, walked off the job just after midnight. They were followed a day later by workers at the Motiva Convent, Motiva Norco, and Shell Chemicals Norco plants. Motiva Enterprises LLC is co-owned by Shell and a subsidiary of Saudi Aramco.

Facebook drivers vote for contract. In what could be a big step for organized labor in Silicon Valley’s service industry, Facebook’s shuttle drivers voted Saturday to ratify a new union contract giving them more pay, better benefits and addressing split-shift scheduling, the WSJ reports. Loop Transportation, the contractor that employs the drivers, cautioned that the agreement isn’t finalized. The contract “has to be signed off by other people,” said Loop’s chief executive, Jeff Leonoudakis, who said his company will now take the contract his company negotiated with Teamsters Local 853 to Facebook for approval.